SIFMA Reaches Settlement with US Exchanges for CAT Dispute

US Exchanges have agreed to remove language which limits their liability should the CAT database be breached.

The Securities Industry and Financial Markets Association (SIFMA) announced on Wednesday that it has been able to come to an agreement with US stock exchanges, regarding the Consolidated Audit Trail (CAT), in which the latter wanted to limit their liability for any data breaches of CAT.

As Finance Magnates reported, brokers will soon need to start sending sensitive client trading information to the CAT database. This database, upon the instruction of the Securities and Exchange Commission (SEC), was built by the Financial Industry Regulatory Authority (FINRA) and the US exchanges, collectively called self-regulatory organisations (SROs).

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The SROs wanted brokers to sign an agreement that would limit the former’s financial liability to $500 per reporting firm in any instance of a data breach, therefore, leaving brokers responsible for any security breaches of the database.

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However, under the settlement, the SROs have agreed to remove the language from the CAT Reporter Agreement, which limits SRO liability for a breach of the CAT database, the financial industry trade group said in a statement.

SIFMA: SROs trying to limit liability was unfair 

Kenneth E. Bentsen, Jr., the president and CEO of SIFMA
Kenneth E. Bentsen, Jr., the president and CEO of SIFMA
Source: SIFMA

Commenting on the settlement, Kenneth E. Bentsen, Jr., the president and CEO of SIFMA said in the statement: “SIFMA’s guiding principle is ‘they who hold the data bear the liability,’ and it was inappropriate and unfair for the SROs to unilaterally impose limits on their liability when they alone hold and control the data inside the CAT, the largest data base to ever be constructed.

“While SIFMA supports the goals of the CAT and our members have invested substantial resources toward its implementation, we remain vigilant regarding the risks to sensitive customer information being compiled in one government-mandated database and we will strenuously oppose efforts to shield responsibility for maintaining the security and privacy of such data.”

Operating in the US and global capital markets, SIFMA is the leading trade association for broker-dealers, investment banks and asset managers.

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